If your nonprofit is struggling financially, you’ve probably already taken steps to cut costs, such as wage freezes and layoffs. But to keep your organization afloat, you may need to come up with more creative ways to generate operating cash flow. Here are five:
1. Revisit your mission and programs. Perhaps there’s a particular program that isn’t critical to your organization’s mission, yet provides a drain on cash balances and staff resources. Saying good-bye to that program can be difficult — but the reward is freeing up funds for more pertinent programs or administrative necessities. If you can redirect individuals to similar programs offered by other organizations, such changes can be made without a break in service.
2. Examine your investment portfolio. Your nonprofit may have portfolio investments or idle assets that aren’t generating operating income — for example, donated real estate, collections and other nonmarketable holdings. Consider divesting some of these possessions and obtaining the operating funds you need.
3. Review your permanently restricted endowments. Another potential source of operating funds is your organization’s permanently restricted endowment funds. Under the Uniform Prudent Management of Institutional Funds Act (UPMIFA), you may be able to spend what was once considered the untouchable original principal (or historical balance) of funds.
Access generally is available when the donor of the original gift is silent about restrictions or hasn’t specified that UPMIFA provisions don’t apply. In some cases, an original condition or restriction may no longer be practicable or possible to achieve. Consult your attorney to learn whether this is an option.
4. Contact the original endowment donor. If UPMIFA provisions don’t open up a potential source of funds, you could take another route by approaching the original donor. Ask the donor to lift all or some of the spending restrictions so you may use a portion of the funds for operating costs.
5. Rely more heavily on board members. Board members usually have a passion for their organization and will do whatever they can to assist. In many cases, board members already have employer backing for your organization, and that company may be willing to step up its financial support. Board members have other community contacts as well. Sometimes all you need to do is ask.
The ideas above, while not all-inclusive, point to cash sources you may need to sustain your organization. For additional help, please contact us.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. The services of an appropriate professional should be sought regarding your individual situation.